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How Should Investors React To Reitmans (Canada) Limited's (TSE:RET.A) CEO Pay?

Simply Wall St

Jeremy Reitman is the CEO of Reitmans (Canada) Limited (TSE:RET.A). This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. Next, we'll consider growth that the business demonstrates. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. This method should give us information to assess how appropriately the company pays the CEO.

View our latest analysis for Reitmans (Canada)

How Does Jeremy Reitman's Compensation Compare With Similar Sized Companies?

At the time of writing our data says that Reitmans (Canada) Limited has a market cap of CA$181m, and is paying total annual CEO compensation of CA$381k. (This number is for the twelve months until February 2019). Notably, that's an increase of 9.3% over the year before. While we always look at total compensation first, we note that the salary component is less, at CA$265k. We examined a group of similar sized companies, with market capitalizations of below CA$262m. The median CEO total compensation in that group is CA$120k.

As you can see, Jeremy Reitman is paid more than the median CEO pay at companies of a similar size, in the same market. However, this does not necessarily mean Reitmans (Canada) Limited is paying too much. We can get a better idea of how generous the pay is by looking at the performance of the underlying business.

You can see a visual representation of the CEO compensation at Reitmans (Canada), below.

TSX:RET.A CEO Compensation, July 22nd 2019

Is Reitmans (Canada) Limited Growing?

Over the last three years Reitmans (Canada) Limited has grown its earnings per share (EPS) by an average of 29% per year (using a line of best fit). It saw its revenue drop -6.7% over the last year.

This shows that the company has improved itself over the last few years. Good news for shareholders. The lack of revenue growth isn't ideal, but it is the bottom line that counts most in business. We don't have analyst forecasts, but shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has Reitmans (Canada) Limited Been A Good Investment?

Since shareholders would have lost about 22% over three years, some Reitmans (Canada) Limited shareholders would surely be feeling negative emotions. It therefore might be upsetting for shareholders if the CEO were paid generously.

In Summary...

We compared total CEO remuneration at Reitmans (Canada) Limited with the amount paid at companies with a similar market capitalization. Our data suggests that it pays above the median CEO pay within that group.

However we must not forget that the EPS growth has been very strong over three years. However, the returns to investors are far less impressive, over the same period. This contrasts with the growth in CEO remuneration, in the last year. Considering the per share profit growth, but keeping in mind the weak returns, we'd need more time to form a view on CEO compensation. So you may want to check if insiders are buying Reitmans (Canada) shares with their own money (free access).

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies, that have HIGH return on equity and low debt.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.